After peaking in 2018 at record heights, a strong supply response in 2019 and the economic devastation inflicted by the COVID-19 pandemic in early 2020 has seen pangasius prices collapse. Vietnamese industry stakeholders are now calling for farmers to reduce stocking to tighten the market.

Production

In Viet Nam, the world’s largest producer of pangasius, total harvests in 2019 are estimated to have reached some 1.4 million tonnes. This would represent an increase of around 3.5 percent compared with the previous year. At the same time, total farming area increased 22 percent to approximately 6 600 hectares. Spiking prices in 2018, along with a generally positive outlook for the global pangasius market, were the primary causes behind this increase in capacity. Subsequent market developments, however, have seen this optimism evaporate as the COVID-19 pandemic is taking a heavy toll on producer profits and dragging down international prices.

In addition to the market slowdown, the array of COVID-19 measures taken by governments aimed at slowing the spread of the virus, including business closures and travel restrictions, have hampered business activities all along the supply chain. Other producers of pangasius (mainly India, Indonesia, Bangladesh and China) are significantly less dependent on export revenue than their Vietnamese counterparts. However, domestic market sales in these countries have also suffered as a result of the restrictions and this will translate into more conservative business decisions by producers and other industry participants.

A FAO-supported pilot project in Indonesia to help farmers producing low-cost pangasius feed, implemented from 2017 to 2019, has reportedly produced positive results. Indonesian production has been steadily increasing and survey respondents at the 2019 Global Aquaculture Alliance (GAA) event estimated 2019 production at 590 000 tonnes.

Trade and markets

Viet Nam exported pangasius worth an estimated USD 2.03 billion in 2019, a drop of 10 percent compared with 2018. This significant shortfall is a reflection of sharp declines in price levels and sales of almost 50 percent to the US market, where exporters have had to contend with regulatory barriers and anti-dumping duties for some years now.

Consumption of pangasius in the United States of America has also been dropping, with the species now ranked behind shrimp, salmon, tuna, tilapia and Alaska pollock. Exports to the European Union have also been stagnant, although the European Parliament’s ratification of a trade agreement between Europe and Viet Nam in early 2019 has now laid the groundwork for expansion in this market. As sales to the United States of America and the European Union have declined, China has become an increasingly important target market for the Vietnamese industry. China, with Hong Kong SAR, accounted for 36 percent of the total value of Vietnamese pangasius exports in 2019, compared with 13 percent for the United States of America, 12 percent for the European Union and 11 percent for the Association of Southeast Asian Nations (ASEAN) region as a whole.

In early 2020, however, buying interest from China dropped off rapidly as increasingly tight restrictions on business and social activity were introduced in the wake of the initial COVID-19 outbreak in Wuhan. China was one of the first countries to begin loosening these restrictions at the end of March, but traders in Viet Nam were still reporting limited activity and weak prices as of mid-April.

Prices

In 2019, farm-gate prices for pangasius dropped to their lowest levels since 2016, to USD 0.76 per kg. Frozen fillet prices (FOB Ho Chi Minh) followed the same trend, falling to USD 2.2 per kg by the end of 2019. In early 2020, the downward trend has continued as demand has dried up from all major markets.

Outlook

However, as of early 2020, activity in both American and European markets has been heavily subdued by the effective shutdown of the restaurant industry, business closures and the imposition of strict social distancing measures. The steep price decline, the evaporation of demand in major markets, and the introduction of COVID-19 containment measures in Viet Nam itself have all combined to heavily dampen prior optimism in the farmed pangasius sector. Farm-gate prices are barely at break even levels and most processors are maintaining minimal operations only. Producers are very hesitant to stock any significant quantities given the broader situation, and raw material is starting to dry up.

Overall retail sales have not been too heavily affected but foodservice demand is likely to remain very weak for some time to come. Tightening supply can be expected to slow the downward price trend, but market recovery is going to be a gradual process marked by caution and uncertainty.